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The answer to this question states the B shares need to be accounted as financial liability under IFRS 9 and i understood why
but my question is why in the last sentence they state
“The shares being held by Ethan will be eliminated on consolidation as
intercompany.”So when an entity hold 70% of preference shares will it be a subsidiary?
No it isn’t a subsidiary but it is an intra-company balance within the group.
if it is not a subsidiary shouldn’t it be accounted under IFRS 9?
THEN how will a holding in a preference share give rise to an intra-GROUP balance?
A GROUP consist of only parent , subsidiaries and sub-subsidiaries only right?
Hi,
You appear to be getting confused between the individual company accounts and the group accounts.
In the individual accounts then yes it will be treated under IFRS 9 as it is a financial instrument and is a way of providing finance between group members. There will therefore be a financial asset in one set of books and a financial liability in the other. As these balances are intra-company balances they will be eliminated in the group accounts.
Thanks
Hi sir
my question is in respect of A shares. how do we account them. will they be treated as investment in subsidiary? plus how do we calculate good will considering share A only or B as well? I am confused about consideration part.. consideration given in respect of A and B should be consider to calculate;ate goodwill?
A shares – I assume investment in subsidiary
Goodwill – Cost of A shares plus NCI less NA – as usual
Remember that the B shares are simply a receivable in the books of the parent – nothing to do with goodwill
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